Contractors’ Workers’ Compensation

January 28, 2007

When helping contractors and subcontractors reduce their workers’ compensation costs, focus on four key elements: accurately determine the cause of the high costs, improve communications with employees, bring employees back to work as soon as they are able to perform any type of productive tasks in the workplace, and reduce fraud and abuse.

Before selecting the best way to help contractor/subcontractor clients reduce workers’ compensation costs, determine whether their costs are above the national average and, if so, locate the cause of the high costs. Once it has been determined whether the client’s costs are higher or lower than the national average, determine what internal practices are driving the costs of workers’ compensation and consider whether Best Practices can be improved. Ask the client questions about current practices and procedures, and review the policies they use when an employee is injured on the job.

In general, workers’ comp costs are high because a company has too many claims lasting too long. The time out of work is disproportionate to the severity of the injury. For example, in one back injury claim the employee was out of work for five months. Leslie J. Hutchinson, MD, president of HLM Consultants, notes that standard guidelines like the American College of Occupational and Environmental Medicine indicates that a soft tissue injury should heal in 90 days or less. If the injury lasts longer than that, it would be good to have the claims adjuster or the insurance company nurse case manager contact the treating physician to determine whether the injury is more complicated than a simple back strain. Large contractors with full or part-time medical directors should have the medical director contact the treating physician to determine whether there is more to be done to help return the employee to work.

Transitional duty programs

Setting up a transitional duty program includes having a written policy and identifying some jobs for a “job bank.” Be creative when identifying transitional duty jobs. Some worksites have limited job classifications so think about “tasks” rather than “jobs.” Ask others on the team if they have a “wish list” of things they’d like to have done which may be within a recuperating employee’s restrictions. Even if it is not possible to locate a transitional duty job, include the employee in all workplace activities, such as safety meetings and group lunches so he/she feels like part of the team.

Since 70 percent (50 percent is indemnity costs, 20 percent is the cost of doctors visits, which would be unnecessary if employees returned to work timely) of the cost of workers’ compensation is related to employees who lose time from work, agents should make sure clients bring employees back to work on transitional duty until they are released to full duty. Make participation in the transitional duty program a condition of employment for all employees who are medically able to perform a transitional duty assignment. Dr. Hutchinson states that, in most cases, bringing the injured employee back to work helps them recuperate faster. Employees heal much faster if they have a normal daily routine to which to look forward. Often, when employees lose their daily routine they experience clinical depression. It can be helpful to establish a goal by which 95 percent of employees injured on the job return, back to work in transitional duty or full duty within the first 4 days after an injury.

Improving return to work ratio

To improve a client’s Return To Work Ratio, and reduce workers’ comp costs, communication with employees, supervisors and medical providers must be improved. Prepare a brochure on “What to Do if You Are Injured On the Job,” explaining each step which should occur immediately after the accident, within the first 24 hours. Every employee should know the procedures and should be given the booklet if injured. Send the brochure home so the employees family understand how to file for workers’ compensation benefits, to what benefits the employee is entitled, how medical care is selected, and whom to call (other than an attorney) if there are questions. Supervisors should know how to obtain medical care for all employees as part of their job responsibilities. They should be able to explain the basics of workers’ compensation, if necessary, when they accompany an injured employee to the clinic.

Names and locations of doctors, clinics, and hospitals should be clearly posted in the workplace. If employees are working off-site or in multiple job sites, give them wallet cards or visor kits with laminated information about medical treatment, weekly meetings, transitional duty assignments and contact information. Make sure to visit the medical providers periodically to ensure they are well-staffed and clean. Have the medical providers visit the workplace so they are familiar with the jobs employees perform, and what transitional duty assignments are available. If there are no transitional duty assignments available, which is often the case when a project is completed, develop a working relationship with a local rehabilitation clinic and explore work hardening options.

When the employee goes to the doctor for the first time, make sure they bring a form with them to collect the necessary information. For example, a Work Ability Form should request information about medical restrictions. If an employee is restricted from doing activities on the job, they should have those same limitations in the non-work setting also.

Barbara Galluppi, CPCU, area senior vice president, Arthur J. Gallagher, indicates that her consultants have been successful in reducing claim costs for contractors “by assuring the upfront claim investigations determine whether a claim is compensable. This can include inquiry into the claimant’s baseline medical condition prior to the injury.”

According to Galluppi, “while it is true in most jurisdictions that the employer is responsible for an aggravation to a pre-existing condition, unless that condition is verified through prior medical records, it is impossible to determine exactly how much is an aggravation and how much existed prior to the injury.”

An employer should follow-up with an injured employee in weekly meetings at the company. Typically, it is the medical director, company nurse or human resource director who meets with the employee. These meetings should emphasize how the employee is feeling, whether they are progressing and whether there are any obstacles to them returning to work at full capacity when the doctor has specified.

Fighting abuse

To combat abuse of the workers’ compensation system, make sure to have frequent contact and communication with every injured employee. If an employee is not available for weekly meetings, misses medical appointments or is always unavailable by phone, it may be an indicator that the injury is not as severe as indicated.

Let the claims adjuster know about any red flags. Some insurance companies have fraud hotlines.

Agents should know about all services the underwriter offers so their clients can take advantage of them.

Periodically, provide clients with “Repeater Reports” to determine if there are any employees who are repeatedly injured on the job at their worksites. This may be an indication that the employee is not physically able to safely perform the functions of the job to which they are assigned. Or, it may mean that the employee is working the system.

Clearly, agents can do a lot to help control workers’ comp costs. makes it easy to apply and even customize all of these steps and more online. even provides a Best Practice Assessment Quiz which gives each client a WC Score, much like the FICO Score, and provides recommendations for improvement.

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